Archive for the ‘Insider trading’ Category

Vladimir Eydelman, the former Morgan Stanley and Oppenheimer Holdings broker arrested on insider trading charges last week, could expose some former clients and the firms to regulatory and legal actions, lawyers and securities industry veterans said.

Eydelman, who was charged with fraud on March 19 by the SEC and the Justice Department, allegedly made more than $5.6 million in illicit profit over three-and-a-half years for himself, friends and more than 50 clients, by trading in securities of companies involved in undisclosed merger deals and tender offers that were leaked by a law-firm employee.

The cloak-and-dagger details of the insider operation – including how a middleman swallowed Post-It notes scribbled with ticker symbols to be traded – made headlines. FINRA has said that examining procedures at brokerage firms for weeding out the bad apples is one of its priorities this year.

Eydelman, 42, had a history of job-hopping, a record of customer complaints and an apparent burst of productivity in recent years, according to the lawsuits and FINRA filings. Though he settled down more recently to work at just two firms over the last 13 years – he was at Oppenheimer for almost ten years before moving to Morgan Stanley in September 2012 – the lawsuits abound with examples of areas where Eydelman apparently evaded compliance overseers.

Four senior executives at Steven Cohen’s SAC Capital Advisors LP received subpoenas as part of the U.S. multiyear probe into insider trading at the hedge fund firm, a person with knowledge of the matter said. Subpoenas were sent to Tom Conheeney, president of SA; Steve Kessler, head of compliance; and Phillipp Villhauer, head trader. A fourth executive, Chief Operating Officer Solomon Kumin, also received a subpoena, the person said later.

Cohen, SAC’s billionaire founder, was sent a subpoena last week to appear before a federal grand jury. After Cohen was summoned, SAC Capital told clients in a May 17 letter that it was no longer cooperating unconditionally with the government and it would no longer be updating clients on the matter. The firm expects “substantially more clarity” in coming months, according to the letter, portions of which were provided to Bloomberg News. The Wall Street Journal reported the executive subpoenas today. Conheeney joined SAC in 1999 and was made president in 2008, while Kessler started in 2005, according to fund documents. […] Villhauer helped SAC make or avoid losses of $276 million on trades that led to the arrest of former portfolio manager Mathew Martoma for alleged insider trading, two people familiar with the matter said in November. Martoma has denied wrongdoing. The U.S. has already linked at least nine current or former employees to allegations of insider trading while at SAC Capital.

The Securities and Exchange Commission announced that the Honorable Deborah A. Batts of the United States District Court for the Southern District of New York entered final judgments against Dr. Joseph F. Skowron III and Dr. Yves M. Benhamou in the SEC’s insider trading case, SEC v. Joseph F. “Chip” Skowron III, et al., Civil Action No. 10-CV-8266-DAB (S.D.N.Y.). The SEC charged Benhamou, a French doctor and medical researcher, with unlawfully tipping material, non-public information to Skowron, a former hedge fund portfolio manager, who was charged with using the inside information to trade ahead of a January 23, 2008 negative announcement, helping the hedge funds he managed avoid losses of approximately $30 million.

At the time of the alleged conduct, Skowron managed six health care-related hedge funds affiliated with FrontPoint Partners LLC. The SEC alleged that Skowron sold hedge fund holdings of Human Genome Sciences Inc. (HGSI) based on tips he received unlawfully from Benhamou, who served on the Steering Committee overseeing HGSI’s clinical trial for Albuferon, a potential drug to treat Hepatitis C. Benhamou tipped Skowron with material, non-public information about the trial as he learned of negative developments that occurred in December 2007 and January 2008. In response, Skowron ordered the sale of the entire position in HGSI stock — approximately six million shares held by the six funds. HGSI announced changes to the trial resulting from the negative developments on January 23, 2008, which led to a 44 percent drop in share price by the end of the day. The hedge funds avoided losses of approximately $30 million by selling their positions in advance of the news. The SEC alleged that, at various points in the relationship, including after the illegal HGSI trades were completed, Skowron gave Benhamou envelopes of cash both in appreciation of his work and to induce Benhamou to lie about their communications.

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